New for TY2025:  Schedule 1-A for the Senior Deduction and exempting some Tips, Overtime, and Car-Loan Interest.  None of these items affect the CA return.  TaxSlayer input automatically carries to 1040.  See NTTC 4012 pages F-18 to 23 for instructions for Additional Deductions.  As with any “below the line” deduction, these are optional.  If the taxpayer doesn’t have all the necessary information, they can choose not to take the deduction.

Schedule 1-A Part II – No Tax on Tips (A) - NTTC 4012 pages F-18 and 20

  • Up to $25,000 in tips may be excluded on a given tax return, for professions that customarily received tips on or before December 31, 2024 (in short, service industries).
  • Worker must have an SSN, not an ITIN.
  • Not eligible if MFS.
  • Cash tips must be reported as income, but can only be deducted if they’re included in box 1 of a 1099 or on an employer’s Form W-2, 4070 or 4137 (section W-2 – Tip Income, page 28). 
  • Deduction phases out for MAGI over $150,000 ($300,000 if MFJ).
  • IRS definitive list: https://home.treasury.gov/system/files/136/Tipped-Occupations-Detailed-8-27-2025.pdf
  • In TaxSlayer, go to [Federal > Deductions > Additional Deductions > No Tax on Tips].
    • TaxSlayer doesn’t automatically deduct tips entered in Form W-2 box 7!

Schedule 1-A Part III – No Tax on Overtime (A) - NTTC 4012 page F-21

  • Not eligible if MFS.
  • Each employee classified as “non-exempt” (usually paid hourly) receiving a W-2 can exclude up to $12,500 of the “half” part of “time-and-a-half”.
    • Only for overtime that’s required by the Federal Fair Labor Standards Act (FLSA).
    • Note for CA returns:  California’s salary threshold for exempt employees is higher than FLSA’s, so more workers are non-exempt in California.
  • Federal overtime here is defined as over 40 hrs/week.
  • Note for CA returns:  CA law defines overtime as over 8 hrs/day, or in excess of a properly elected regular alternate schedule such as 4x10 or 9x80.  So deductible overtime will often be less than total CA overtime.  CA also requires “double time” pay in some cases.  CA workers can calculate their deduction one of two ways; in both cases, the deduction is the lesser of $12,500 or “number of FLSA overtime hours” x “½ the regular hourly pay rate”:
    1. A statement from their employer showing overtime hours under FLSA rules, or
    2. Their weekly, biweekly or monthly timecards showing hours worked per week (deduction is out-of-scope if the employee is unable to determine the FLSA overtime hours or pay on their own).
      • Print our Overtime worksheet for them to take to their employer at tiny.cc/ca-ref.
  • Deduction phases out for MAGI over $150,000 ($300,000 if MFJ).

Schedule 1-A Part IV – No Tax on Car Loan Interest (A) - NTTC 4012 pages F-22 to 23

  • Up to $10,000 interest may be deducted per tax return.  Vehicle limitations:
    • new vehicle purchased in 2025
    • under 14,000 lbs
    • must have at least two wheels
    • for personal use only
    • must have final assembly in the USA:  verify at https://www.nhtsa.gov/vin-decoder
  • VIN must be entered on the tax return.
  • Lender may issue an interest-paid statement if over $600, else see year-end lender statement.
  • Deduction phases out for MAGI over $150,000 ($200,000 if MFJ).

Schedule 1-A Part V – Enhanced Deduction for Seniors (B) - NTTC 4012 page F-19

  • $6,000 deduction per taxpayer [and spouse] over age 64 with SSN valid for employment, not ITIN.  MFS not eligible.
  • Social Security income is not required.
  • Deduction phases out for MAGI over 75,000 ($150,000 if MFJ).
  • TaxSlayer calculates automatically.

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